ALEC: Is RI-Innovates Corporate Cronyism in the Best Interests of Ocean State Families?

Rhode Island Innovates is the official state economic development plan, created by the Brookings Institution and endorsed by the Governor. Part of its hidden agenda is to advance an unproven “smart growth” federal agenda that seeks to develop urbanized “innovation districts” by handing out special tax credits to targeted industries in specified geographies.

Will this crony, special-interest oriented strategy help the average Rhode Island family member find new work? Doubtful, as a similar scheme in New York has apparently failed.

Start-Up NY: A Cautionary Tale for Rhode Island

Part of the RI Innovates plan is designed to give away taxpayer-funded subsidies to many of the same industries targeted by a similar in the Empire State, called Start-Up NY.

After the implementation of a $53 million national advertising blitz country (including Rhode Island), Start-Up NYcreated on net only 76 new jobs. Alarmingly, this total doesn’t even reflect the program’s total investment, merely the costs incurred to advertise it.

Above is a pie chart reflecting Start-Up NY’s status as a failing investment. The data was pulled from the program’s first Annual Report and should discourage any reasonable person from believing that the state can direct an economic expansion with any effectiveness. As small as the “net new jobs created” total is, it should be noted that four qualifying industries saw zero new jobs created in 2014.

Given the shortcomings of Start-Up NY, it begs the question: should government be trusted to manage a state economy, or even be given considerable resources to try and steer it?

When government tries to pick winners and losers by handing out subsidies, it creates an imbalance in the market, resulting in un-equal slices of the jobs pie. Further, when government extracts money from taxpayers in the private sector to pay for these subsidies, this kind of corporate cronyism tends to shrink the overall jobs pie, reducing opportunities for quality jobs for families to move up the income ladder.

Joe Horvath is a Research Analyst for the American Legislative Exchange Council (ALEC) Center for State Fiscal Reform. ALEC is part of a local-national task-force to analyze the Brookings plan for R.I. and to promote more family-friendly economic development strategies. Learn more about their organizations at rifreedom.org and alec.org.

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